What Factual Factors Militate Towards Application Of The “Inevitable Disclosure” Doctrine?

We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.

Looking at our blogging over the past few days, it appears that an inevitable disclosure doctrine claim is most likely to be accepted by a Texas court when:

• An employer targets specialized employees for hire specifically because the employer is weak in the technology areas and needs to obtain talent from competitors to catch up. Compare Cardinal Health Staffing Network, Inc., 106 S.W.3d at 241-42 (declining to apply the inevitable disclosure doctrine, in part because the new employer had devised a business plan for its own interim pharmacy staffing business over a year before it hired the plaintiff’s ex-employee and it was clear that the new employer would have started this business with or without him) with FMC Corp., 677 F.2d at 505 (applying doctrine because plaintiff company had clearly superior product that it invested in heavily and the company that hired plaintiff’s ex-employee was far behind in technology). But see Conley, 1999 WL 89955, at *4-5 (noting that this type of evidence is not required in all cases to support the imposition of the inevitable disclosure doctrine).

• The case involves research and product development employees – the key employees a company relies on to develop and refine valuable new technologies and give it a competitive edge. See FMC Corp., 677 F.2d at 505 (applying doctrine because plaintiff company had clearly superior product in which it invested $85 million dollars, and took extraordinary steps to protect its secrecy).

• The case involves an employee who went to work for a company that will become more competitive in the at-issue technology areas more quickly because it hired the employee. Weed Eater, Inc., 562 S.W.2d at 902 (relying on same proof in granting injunctive relief).

• The company the employee went to work for has rejected requests to describe the employee’s duties or to ensure the ex-employer’s confidential information will not be utilized. See Spicer, 2006 WL 1751786 at *9-11 (relying on the fact that the new employer had done nothing to ensure that the former employer’s confidential information would not be used by the defendant in applying the legal equivalent of the inevitable disclosure doctrine); FMC Corp., 677 F.2d at 504 (same). Note: Even when the new employer has taken such efforts, some courts still apply the inevitable disclosure doctrine. See Conley, 1999 WL 89955, at *6 (noting that “the richer the henhouse, the less wise it is to trust even the most responsible and reliable of foxes”).

• The facts show the employee’s duties are significantly the same or similar at their new employer as they were at their former employer. Conley, 1999 WL 89955, at *5 (noting that this type of evidence is relevant to support the imposition of the inevitable disclosure doctrine).

• The employee could easily memorize his or her ex-employer’s confidential information and trade secrets. See Spicer, 2006 WL 1751786 at *9-11 (relying on such evidence in applying the legal equivalent of the inevitable disclosure doctrine); Williams, 704 S.W.2d at 471 (noting that plaintiff’s ex-employee testified that he “had a photographic memory and is able to observe the way something is made and then copy it” in applying doctrine).

• The new employer refuses to acknowledge that the information is a trade secret – so that any promise not to use or disclose confidential or trade secret information is not truly an effective protection for the former employer. See FMC Corp., 677 F.2d at 505 (applying inevitable disclosure doctrine partially because the new employer argued that some information that was clearly a trade secret was not and, therefore, “without the injunction, Witt [the ex-employee] may, out of ignorance of what information constitutes a trade secret, reveal the confidential matters FMC seeks to protect”).

• The former employee worked on projects in specific technology areas for their former employer that they are now working in for their new employer. Conley, 1999 WL 89955, at *4-5 (noting that this type of evidence tends to support the imposition of the inevitable disclosure doctrine).

• The fact that the former employer would not know for years if the former employee’s use of its trade secrets has resulted in harm helps prove irreparable harm. See Williams, 704 S.W.2d at 471 (relying upon same evidence in similar case to enjoin plaintiff’s former manufacturing manager).

• The information and expertise that the ex-employee took with him or her (if even just in his or her head) regarding the technology areas are: (a) information the employee must have to do his or her job with his or her new employer; and (b) truly the former employer’s trade secrets, not general concepts and information that are publicly available. See Cardinal Health Staffing Network, Inc., 106 S.W.3d at 241-42 (declining to apply the inevitable disclosure doctrine, in part because the information that the plaintiff’s ex-employee needed to develop business contacts for the new employer was available publicly).

• Note that proof of misconduct or wrongdoing by the ex-employee is not required under Texas case law, though it is helpful. See Conley, 1999 WL 89955, at *4-5 (noting that proof of ex-employee’s misconduct is helpful to a plaintiff seeking an injunction based on inevitable disclosure, but it is not required in all cases); FMC Corp., 677 F.2d at 504 (applying doctrine without proof of actual misappropriation).

Advertisements
This entry was posted in Houston Employment Law, Houston Executive Lawyer, Inevitable Disclosure, Non Compete Agreements, Trade Secrets. Bookmark the permalink.